New EU budget: Winners and losers

05/04/2018

The European Commission presented the draft budget of the EU for 2021-2027. Germany will pay more, and Poland and Hungary can be punished with a reduction in payments. The fight for finance promises to be tough.

derek4ukip via flickr

The negotiations on the so-called "long-term financial planning" in the European Union represent a long and exhausting struggle even in calm times. Now that the EU is getting ready for Brexit and the loss of the third-largest payer in the European box office, the fight promises to be particularly desperate, says Guntram Wolff from the Brussels think-tank Bruegel.

The now presented "long-term financial plan" for 2021-2027 will be the first for the EU without the UK. It means 12 billion euros, which London in recent years has paid to the European budget, will be missing. Such are calculations of the EU Commissioner for Budget Günter Oettinger, which he voiced on Wednesday, May 2, in an interview with the German ARD television channel. The Commissioner believes the EU has two ways in the future: either to start saving and reducing the budget - or to invite member states to pay more.

However, it becomes obvious from Oettinger’s interview that the path has actually been chosen. The EU budget will not be reduced, moreover, it be growing, albeit insignificantly. And the countries staying in the EU will have to pay more. For Germany, which is the largest payer in the single Europe’s budget, the additional costs will amount "11-12 billion euros per year." Of this amount, according to Oettinger, 3.5 to 4 billion euros will go to replace the missing British contributions, as well as to strengthen border control in Europe. The rest is the usual increase in expenses caused by inflation.

However, not all spending will be growing in the years 2021-2027. Günther Oettinger plans to cut about 5% of subsidies to agriculture and infrastructure-lagging regions. This means a decrease in subsidies to current recipients for these budget items - Poland, Hungary and Greece, and (to a lesser extent) Ireland.

Representatives of these countries already threaten to veto the draft new budget. Guntram Wolf from the center of Bruegel, however, calls the current amount of subsidies for these items "overpriced." "It's better to start subsidizing agriculture less and invest more in other projects, like preserving the environment," he said.

But, despite the different opinions, Oettinger intends to adopt the new 7-year financial plan as soon as possible. The current EU budget was agreed upon for 2 years. Now the budget commissioner wants to meet the goal in a year to make it before the elections to the European Parliament in June 2019.

Apparently, it won’t be easy to make it happen. Germany has no objections to the growth of its contribution to the European cash desk as a whole. But the Netherlands, Austria, Denmark and Sweden are objecting. Other payers, according to Oettinger, understand complexity of the EU’s goals - such as the problem of refugees, countering terror, defense - and are not objecting to raising their contributions.

Less money for Warsaw and Budapest

Funds to Warsaw and Budapest are a separate topic for disputes. According to Oettinger, if the country of the European Union does not fulfill the basic criteria of the rule of law, for example, the principle of independence of the judiciary, it may lose payments from the European bank. Hungary and Poland are already discontent with these promises of the EU Commissioner.

Both countries have been criticized for their judiciary reforms for already several years. At the same time, the fundamental difference between the new budget and the current situation will be that only the European Commission’s own decision will be sufficient for the adoption of penalties.

And this means that the struggle will unfold now, during the discussion of the draft financial plan for 2021-2027. "It will be very difficult to achieve unity here," Guntram Wolf predicts, "and we are guaranteed a veto from those countries that may lose their payments."

Gunther Oettinger, however, does not intend to retreat. We must be sure, he said on May 2, that by allocating funds for research, infrastructure, social projects, we will be able to guarantee that in the event of disagreement, "independent judges will assess or decide on the return of money." And if there are no such judges? The answer to this question will be consultations of the coming months in Brussels, which promise to be extremely lively.